2020 OECD ECONOMIC SURVEY OF CHILE Preparing for the recovery 4th February 2021, Paris – Santiago @OECDEconomy @oecd
http://www.oecd.org/economy/chile-economic-snapshot
The economy is in recession Real GDP, y-o-y % changes
Y-o-y % changes
Y-o-y % changes
Note: Data for 2020 refer to an average over Q1:Q3. Source: OECD, Analytical database.
2020*
2019
2018
2017
-8
2016
-8
2015
-6 2014
-6 2013
-4
2012
-4
2011
-2
2010
-2
2009
0
2008
0
2007
2
2006
2
2005
4
2004
4
2003
6
2002
6
2001
8
2000
8
2
Unemployment is increasing Unemployment rate
% of labour force
% of labour force
12
12
Note: Data for 2020 refer to an average over Q1:Q3. Source: OECD, Analytical database.
2020*
2019
2018
2017
2016
2015
2014
2013
2012
2011
0
2010
0
2009
2 2008
2 2007
4
2006
4
2005
6
2004
6
2003
8
2002
8
2001
10
2000
10
3
Inflation is back on target Y-o-y, % changes 6
Inflation tolerance range Core inflation¹
5
Headline inflation Inflation expectations²
Y-o-y, % changes 6 5
4
4
3
3
2
2
1
1
0 2014
0
2015
2016
2017
2018
2019
Note: 1. Core inflation includes all items without energy and fuels. 2. Inflation expectations at 23 months. Source: Central Bank of Chile; National Statistical Institute (INE).
2020
4
Financial conditions are favorable Long-term sovereign rates
% 14
CHL
12
DEU
GBR
%
USA
LACยน
14 12
10
10
8
8
6
6
4
4
2
2
0
0
-2
2007
2008
2009
2010
2011
2012
2013
2014
Note: 1. LAC refers to the unweighted average of Brazil, Colombia and Mexico. Source: OECD, Analytical database.
2015
2016
2017
2018
2019
2020
-2
5
Copper price is back to pre-pandemic levels Exports and copper price Index, 2008=100 130
USD per pound 30
Exports, volumeยน
Copper price (RHS, values in reverse order)
120
55
110
80
100
105 130
90 80
155 2008
2009
2010
2011
2012
Note: 1. Four-quarter moving averages. Source: OECD, Analytical database; Central Bank of Chile.
2013
2014
2015
2016
2017
2018
2019 2020 6
The recovery will be gradual 2019
2020
2021
2022
Gross domestic product
1.0
-6.0
4.2
3.0
Private consumption
1.1
-7.7
7.5
3.4
Government consumption
0.0
-2.1
5.5
1.5
Gross fixed capital formation
4.2
-13.9
1.8
4.1
Exports
-2.2
-0.7
7.2
4.1
Imports
-2.3
-13.4
8.4
5.6
Consumer price index
2.6
2.9
2.6
3.0
Central government financial balance (% of GDP)
-2.8
-8.7
-4.7
-3.8
Current account balance (% of GDP)
-3.9
0.3
-0.2
-0.7
Note: GDP refers to annual percentage growth. . Source: OECD Economic Outlook 108 database.
7
The fiscal accounts remain sustainable Central government gross debt as %GDP % 120 110 Lower long term growth and prolonged fiscal deficit³ 100 90 Lower long term growth² 80 Baseline scenario¹ 70 60 50 40 30 20 10 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Source: DIPRES, OECD Economic Outlook 108, Central Bank of Chile and OECD calculations. 8
Recommendations to continue coping with COVID-19 • Increase capacity for extensive testing and tracing together with an adequate risk communication strategy • Continue to provide treatment for all patients. • Maintain as necessary monetary measures to provide liquidity to uphold domestic demand and facilitate business. • Continue fiscal measures to support firms, in particular SMEs, and cash transfers for the most vulnerable families, until the recovery is well underway. 9
Building a stronger middle class
10
Many households are economically vulnerable %
Economically vulnerable households, %
% 70
70
52.7
60
60
Note: The “economically vulnerable” are those who are not “income poor” but have equivalised liquid financial assets below 25% of the income poverty line. The OECD average is the simple country average. Source: OECD, Wealth Distribution database.
LVA
GRC
SVK
NZL
CHL
POL
IRL
SVN
ESP
OECD
USA
AUS
FIN
CAN
PRT
0
EST
0
HUN
10 FRA
10 DEU
20
LUX
20
DNK
30
NLD
30
ITA
40
BEL
40
NOR
50
AUT
50
11
Out-of-pocket spending for health is high %
Out-of-pocket spending as a % of health spending
%
45
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
FRA LUX NLD USA IRL DEU JPN NZL SVN SWE DNK CZE NOR CAN ISL COL GBR TUR AUS FIN SVK BEL OECD POL ISR ESP ITA EST AUT CHE PRT HUN KOR LTU CHL GRC LVA MEX
45
Note: OECD refers to an unweighted average of latest available data for all its member countries. Source: OECD, Health Expenditure and Financing database.
12
The tax and transfer system is inefficient Gini coefficient 0.5
0.45
Income inequality pre and post-tax and government transfers Gini before taxes and transfers
Gini after taxes and transfers
0.4 0.35 0.3 0.25 0.2 0.15 0.1 0
SVK ISL CHE CZE SWE EST KOR SVN NOR POL DNK HUN CAN JPN NLD DEU BEL OECD ISR LVA AUS NZL TUR AUT FIN LTU ITA PRT ESP FRA LUX GBR GRC USA IRL MEX CHL
0.05
Note: Working age population. Data for Chile refers to 2017. Data for Chile are not directly comparable to other countries due to pension’s contributions that are not taken into account, but which reduce pre-transfers and taxes income dispersion. OECD refers to the unweighted average of latest available data of 36 member countries, excluding Colombia. Source: OECD, Income Distribution and Poverty database.
13
Educational outcomes are strongly linked to the social background PISA score 510
PISA score in mathematics for the bottom quarter of economic PISA score status
510 490
470
470
450
450
430
430
410
410
390
390
370
370
350
350
330
330
BRA COL CRI CHL MEX ARG TUR ISR GRC HUN SVK USA LUX CZE FRA LTU ESP OECD LVA PRT ITA SWE NZL AUT AUS BEL GBR ISL DEU IRL POL NOR SVN NLD FIN CHE DNK KOR CAN EST JPN
490
Note: Argentina refers to region of Ciudad Autónoma de Buenos Aires. Socio-economic status according to ESCS which refers to the PISA index of economic, social and cultural status. Source: PISA 2015 Results (Volume I): Excellence and Equity in Education - © OECD 2016.
14
Public spending in education is low USD (PPP) 20 000
General government expenditure in in pre-primary, primary and secondary education based on full-time equivalents, in equivalent USD converted using PPPs for GDP
USD (PPP) 20 000 18 000
16 000
16 000
14 000
14 000
12 000
12 000
10 000
10 000
8 000
8 000
6 000
6 000
4 000
4 000
2 000
2 000
0
COL MEX TUR CHL LTU GRC HUN SVK POL EST CZE LVA ISR ESP PRT SVN NZL ITA AUS OECD JPN GBR FRA CAN IRL FIN KOR DEU NLD ISL USA SWE BEL DNK NOR AUT CHE LUX
18 000
Note: Data for Chile refer to 2017. Data for the OECD refer to an unweighted average from 2016. Source: Education at a Glance 2019: OECD Indicators - © OECD 2019.
0
15
A large share of workers has precarious jobs % dependant workers 30 25
% of total employment 60
Share of temporary workers
50
Share of self-employment (RHS)
20
40
15
30
10
20
5
10
0
OECD
Source: OECD, Labour Force Statistics database.
CRI
CHL
COL
0
16
Recommendations to strengthen the middle class and foster inclusiveness • Increase the redistributive impact of the personal income tax by lowering the thresholds at which the bottom and top bracket apply. • Establishing a single national pool of healthcare funding to cover a common package of services for the whole population • Step-up investment in high-quality early childhood, primary and secondary education. • Enhance the provision of childcare and early childhood public structure to foster female employment. • Make the temporary measures to increase protection for unemployed workers permanent or automatically triggered when unemployment reaches certain thresholds. 17
Boosting productivity to support the recovery
18
Productivity is polarized 1 000 x CLP
Chile has a long tail of small firms with low productivity % of firms by size
250
1 000 x CLP
200 150 1.3%
100 50
72.6%
21.0%
Micro (1-9)
Small (10-49)
5.2%
0
Source: OECD calculations based on Quinta Encuesta Longitudinal de Empresas (ELE-5), 2017.
Medium Large (50-249) (250+)
19
Many sectors are dominated by few business groups Extent of market dominance, 2019
7=best 7 6
7=best 7 Spread among many firms
Dominated by a few business groups
6
5
5
4
4
3
3
2
2
1
1
0
CHL
COL
ARG
MEX
LAC
ZAF
BRA
PRT
CRI
ESP
FRA
USA
DEU
Note: This indicator shows the extent of market dominance, 1-7 (best). In the World Economic Forum, Executive Opinion Survey, it is the answer to the following question: In your country, how do you characterize corporate activity? [1 = dominated by a few business groups; 7 = spread among many firms]. LAC refers to the unweighted average of Argentina, Brazil, Colombia, Costa Rica and Mexico. Source: World Economic Forum, The Global Competitiveness Index 4.0 2019 dataset (version 04 October 2019).
0
20
Regulations are too complex Score 3
Complexity of regulatory procedures Score, 2018
Score 3
More complex procedures
2.5
2.5
2
2
1.5
1.5
1
1
0.5
CZE ESP KOR LVA NLD POL CHE HUN LUX ITA DEU DNK NOR SVN CAN FIN MEX SVk ISL LTU OECD GBR ISR PRT SWE TUR FRA ARG AUS NZL AUT BEL GRC JPN IRL BRA CHL
0
0.5
Source: OECD, 2018 PMR database.
0
21
The impact of new regulations is not systematically assessed Score 4.5
Assessment of impact on competition Score, 2018
Score 4.5
More assessment
4 3.5
3.5
3
3
2.5
2.5
2
2
1.5
1.5
1
1
0.5
0.5 GBR BEL AUS AUT CAN CHE CZE DEU ESP FIN FRA ISL ITA JPN KOR LTU LUX NLD NOR POL SVk SWE OECD TUR HUN IRL ISR MEX NZL DNK PRT CHL GRC ZAF SVN KAZ LVA ARG BRA
0
4
Source: OECD, 2018 PMR database.
0
22
Recommendations to close productivity gaps • Streamline permits and their process by implementing a zerolicensing procedure to encourage investment and simplify regulations for SMEs. • Open the market of notaries and allow introducing technological innovations and data sharing with the administration in a systematic way. • Allow creditors to be able to initiate restructuring and not only liquidation. • Disaggregate public procurement needs into regional lots and consider allowing the grouping of suppliers to improve SMEs participation. 23
Boosting digital transformation to help the recovery
24
Broadband penetration is low 200
Broadband connections per 100 inhabitants, June 2019
180 160 140
200 180
Mobile connections
Fixed connections
160 140 120
100
100
80
80
60
60
40
40
20
20
0
0
COL HUN MEX TUR PRT BEL CAN SVN DEU GRC SVK ITA AUT FRA CHL NZL CZE CHE GBR LUX ESP ISR NOR LTU IRL POL OECD KOR NLD ISL SWE LVA DNK AUS USA EST FIN JPN
120
Source: OECD, Broadband Portal, www.oecd.org/sti/broadband/oecdbroadbandportal.htm; OECD ICT Access and Usage by Households and Individuals database.
25
Low educated use less internet Internet use in the past 12 months by education level Medium
% 100
High
Zero or a low level
% 100
90
90
80
80
70
70
60
60
50
50
40
40
30
COL
GRC
LAC
MEX
CHL
OECD
TUR
ESP
30
Source: OECD, ICT Access and Usage by Households and Individuals database 26
Many Chileans lack basic skills Share of 25-54 years-old lacking basic skills, % 0
10
20
30
40
50
60
70
PER ECU MEX CHL TUR ISR SVN GRC USA POL IRL LTU GBR DEU CAN SWE KOR SVK EST DNK NZL AUT BEL NOR NLD AUS CZE FIN JPN Note: Individuals lacking basic skills score at most Level 1 (inclusive) in literacy and numeracy and at most Below Level 1 (inclusive) in problem solving (including failing ICT core and having no computer experience) Source: OECD calculations based on Survey of Adult Skills (PIAAC).
27
Training teachers should be a priority Share of teachers reporting needing further training to do their job % 80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
CAN NLD BEL GBR AUS USA KOR DNK NZL TUR NOR IRL FIN SWE SVK ITA FRA ISR GRC RUS ESP SGP CZE EST SVN POL DEU AUT LTU CHL JPN
% 80
Source: OECD calculations based on Survey of Adult Skills (PIAAC); OECD, TALIS 2018 database. 28
Digital adoption in firms lags behind % of firms 40 35
Small and micro firms
Chile
OECD
30 25 20 15 10 5 0
Big data
E-sales
CMP
ICT specialists in Cloud computing the firm
ERP
Note: customer management platform (CMP), Enterprise Resource Planning (ERP) Source: For Chile, data come from the ICT survey 2019, Ministry of Economy. Data for the OECD come from OECD, ICT Access and Usage by Businesses database.
29
Automation is already impacting the labour market Employment rate changes by level of automation risk, 2011-2017 Percentage points 12 10 8 6 4 2 0 -2 -4 -6 -8 -10 -12
Low automation risk
Significant automation risk
Note: The bars show changes in employment rate in each occupational classification between 2011 and 2017. Significant risk – above 50% probability of automation; low risk – below 50% probability of automation as defined by Nedelkoska and Quintini (2018). Source: OECD calculations based on CASEN (2011-2017), PIAAC (2012 and 2015), Marcolin et al. (2016) and Nedelkoska and Quintini (2018).
30
Those that need it the most, train less Share of workers participating in training, % of all workers % 30 25 20 15 10 5 0
Below upper -secondary
Uppersecondary
Note: Year 2017. Workers participating in training in the last 12 months. Source: OECD calculations using CASEN (2017).
Teritiary
31
Key recommendations for boosting digital transformation • Ensure low barriers to entry to the communication sector by replacing the existing regulation for concessions. • Increase digital literacy in schools giving digital skills more prominence in the national curriculum, and enhancing the digital skills of teachers and school-directors. • Boost public support to SMEs, in cooperation with the private sector, trough targeted programmes to facilitate the adoption digital tools. • Foster a collaborative digital innovation ecosystem by strengthening business collaboration and fostering openinnovation practices. • Embark in a full revision of firm-provided training programmes to increase relevance and quality of training and better target participation to vulnerable workers. 32
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http://www.oecd.org/economy/chile-economic-snapshot
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2020 OECD ECONOMIC SURVEY OF CHILE Preparing for the recovery 4th February 2021, 14h Paris – 10h Santiago @OECDEconomy @oecd
http://www.oecd.org/economy/chile-economic-snapshot